* In the last few weeks some commentators have suggested that
the UK economy is being held back by so-called "zombie
companies". These are weak, possibly loss making companies,
which are able to survive thanks to low interest rates and a
supposedly more tolerant attitude to corporate borrowers on the
part of banks.
* The argument runs that if these zombie companies were allowed
to fail, more productive businesses would fill the gap, leading to
a more efficient allocation of resources. To its advocates this
sort of creative destruction makes way for the strong businesses of
the future.
* The investor Jon Moulton, head of Better Capital, has been a
prominent exponent of the zombie company argument. He recently told
the Financial Times that "[t]he vast majority of companies we
look at with financial problems we never get the chance to invest
in because banks will forbear, sort them out, given them a few
bob."
